Financial police in the southern Italian city of Salerno said Monsignor Nunzio Scarano had transferred millions of euros in fictitious donations from offshore companies through his accounts at the Vatican’s Institute for Religious Works. Police said millions have been seized and that other arrest warrants were also issued.

Scarano’s lawyer, Silverio Sica, said his client merely took donations from people he thought were acting in good faith to fund a home for the terminally ill. He conceded, however, that Scarano used the money to pay off a mortgage.

“We continue to strongly maintain the good faith of Don Nunzio Scarano and his absolute certainty that the money came from legitimate donations,” Sica told The Associated Press.

The Salerno investigation was already under way when Scarano, dubbed “Monsignor 500″ for his purported favored banknotes, was arrested in June in Rome on the smuggling accusations.

Prosecutors say he, a financier and a carabinieri officer devised an elaborate plot to transport 20 million euros in a private jet from Switzerland to Italy avoid paying customs duties. The plot fell apart because the financier reneged at the last minute.

His lawyer has said Scarano in that case was merely acting as a middleman.

Prosecutors and the priest’s lawyer say the money involved in both the Swiss smuggling case and the Salerno money-laundering case originated with one of Italy’s most important shipping families, the d’Amicos. The family, from Scarano’s hometown of Salerno, denied its involvement in a July 1 statement. They did not respond to an email seeking fresh comment Tuesday. No one in the family has been arrested in either case.

Scarano was fired from his job as an accountant in the Vatican’s main financial office and his accounts at the Vatican bank were frozen by Vatican authorities after his arrest.

The Vatican’s top prosecutor said last week that the Holy See had responded to two official requests from Italy for information about Scarano’s accounts, while making its own request to Italian authorities for help in its own money-laundering investigation of him.

Scarano’s arrest in June led to the resignations of the Vatican bank’s top two managers and accelerated efforts to make the troubled institute conform to international anti-money-laundering norms.

Pope Francis has made reforming the bank a priority and has named a fact-finding commission to look into its activities and legal structure.

Scarano’s initial arrest in the smuggling case was reduced to house arrest because of his ailing health. Sica said the prelate would serve the new arrest warrant also under house arrest.